Deeds

An Introduction

The ‘deed’ is a way of using the physical form in which an agreement is recorded in order to give it enforceability. The agreement is put in writing and, traditionally, ‘sealed’ by the party or parties to be bound to it.  The ‘seal’ could take the form of a wax seal, a seal ‘embossed’ onto the document by a special stamp, or simply the attachment of an adhesive paper seal (usually red). Such contracts were also known as ‘contracts under seal.’

Requirements

Individuals

The formal requirements for making a ‘deed’ are now contained in s 1 of the Law of Property (Miscellaneous Provisions) Act 1989. There is no longer any requirement that the document should be sealed. The document must however, make it clear ‘on its face’ that it is intended to be a deed, and it must be ‘validly executed’ by the person making it or the parties to it. ‘Valid execution’ for an individual means that the document must be signed in the presence of a witness who attests to the signature. In addition there is a requirement of delivery-the document must be ‘delivered as a deed by the person executing it or a person authorised to do so on his behalf.’

Companies

For a company incorporated under the Companies Acts, the position is governed by s 36A of the Companies Act 1985. The ‘execution’ of a document by a company can take effect either by the affixing of its common seal, or by being signed by a director and the secretary of the company, or by two directors. For a document executed by a company to be a deed, it simply needs to make clear on its face that this is what is intended by whoever created it. It will take effect as a deed upon delivery, but unless a contrary intention is proved, it is presumed to be delivered upon being executed.

In OTV Birwelco Ltd v Technical and General Guarantee Co Ltd, it was held that a deed was validly executed within s 36A of the Companies Act 1985 where a company had used its trading name rather than its registered name, nor did it render the deed unenforceable that the seal used was engraved with the trading name rather than the registered name. Non-compliance with s 350 rendered the company concerned liable to a fine, but had no automatic effect on the validity of the deed.

Consideration

If the parties to an agreement have taken the trouble to put it into the form of a deed, following the requirements laid down by s 1 of the 1989 Act (or s 36A of the Companies Act 1985), the courts will not inquire into whether the other main test of enforceability (that is ‘consideration’) is present. The characteristic of the modern doctrine of consideration is that there is mutuality in the arrangement, with something being supplied by both parties to the agreement. That is not necessary in an agreement which is put into the form of a deed. Where, therefore, a transaction is ‘one sided’ with only one party giving, and the other party receiving all the benefit without providing anything in exchange, the deed is one certain way of making the arrangement enforceable.

Deeds may be used even where the transaction is supported by consideration. This has traditionally been done in relation to complex contracts in the engineering and construction industries. This is probably because, by virtue of the Limitation Act 1980, the period within which an action for breach of an obligation contained in a deed is 12 years, whereas for a ‘simple’ contract it is only 6 years. The longer period is clearly an advantage in a contract where problems may not become apparent for a number of years. The practise of ‘sealing’ a document is also still used, even though it is no longer necessary even for a company.  It may in some circumstances serve to make it clear that the document is intended to be a ‘deed.’ It does not in itself, however, make the transactions concerned any more or less enforceable.